Clearcover keeps on motoring
Written by Michael Yang, Managing Partner, OMERS Ventures
Today, Clearcover announced a $200M Series D financing led by Eldridge, with a host of new investors joining the syndicate. We doubled down on our investment in Clearcover as we couldn’t be happier with the company’s progress and momentum. After all, it was only 16 months ago that we led Clearcover’s prior $50M round of financing. Back then, Clearcover was a merry band of 100 or so employees, selling personal auto insurance in 4 states, having just stood up an owned & operated carrier business.
But within three months of our investment closing, the global pandemic hit and like with every business on the planet, the original 2020 budget needed serious improvisation. The business has more than doubled on key metrics like gross written premium and policies in force. The company is now 240 employees strong and has expanded to selling insurance in 16 states. Two key contributors to Clearcover’s steady march are Norm Smagley, Chief Financial Officer, and Vandana Venkat, Chief Insurance Officer, who joined last June and July, respectively. We sat down with them to get their hot take on a variety of topics that we thought you would enjoy.
Michael Yang: Norm, you’ve worked at several private and public companies and been through numerous financing events. What was it like to raise $200M, remotely, during the pandemic for Clearcover?
Norm Smagley: In some ways it was pretty typical. In my experience investors generally approach new opportunities with a lot of skepticism and this raise was no different. Fortunately for us, we saw a lot of investors quickly understand our story and competitive advantage. That felt really good.
What was different was pitching the story via zoom. Typically, I would go on a road show, spending several days in New York, and maybe Boston, meeting with investors in both one-on-one and small group meetings. That process is really time intensive, not particularly efficient, and limits the number of investors that you can meet, though you do get the opportunity to make more of a personal connection with the individuals.
I think the main advantage of doing the meetings virtually is that we were able to get in front of more investors than we would have been able to do in person. Either way works. It will be interesting to see what happens post-covid, whether or not we go back to in-person versus virtual.
MY: Vandana, auto insurers were actually rebating drivers last year because they weren’t driving. How did the pandemic impact the personal auto insurance business like never before?
Vandana Venkat: One of the sectors most affected by the pandemic-induced lockdowns has been auto insurance. At various stages of the pandemic, miles driven and auto accident frequency were down by over 40%. Despite driving behavior showing signs of returning to normalcy in many parts of the country, the pandemic’s impact on vehicle usage and insurance coverage will likely continue into the future.
Historically, the frequency of auto accidents has been correlated with the state of the economy. Most recently, we saw this in 2008, with frequency down significantly during the global financial crisis. I don’t have a crystal ball, but results published so far tell us that auto claim frequency will likely remain suppressed for a while until we return to normal work/commuting patterns. Of course, we may not see frequencies return to pre-pandemic levels if workforce models continue to adopt more permanent work from home or hybrid arrangements.
The pandemic also had a material impact on insurance shopping behavior. The pandemic-driven economic decline drove both more price-shopping behavior, where price sensitive shoppers looked for lower prices for the same coverage, and some drivers chose to forego insurance altogether. This had an impact on growth and retention across the industry. As you said Michael, insurers were actually rebating drivers last year. To me, the bigger question is, will companies continue to recognize the impact of reduced driving, frequency, and improved loss results and reflect it in lower premiums in a holistic fashion? We are seeing this manifest itself across the industry, including from carriers like Clearcover.
MY: Norm, talk to us about how Clearcover operated as a remote organization, continuing to hire up and get stuff done through challenging times in the world?
NS: It is very fortunate that we are a service company rather than a manufacturing company because that gives us a lot more flexibility in how we get our work done. The video conferencing that is available today makes it pretty easy to collaborate. You can’t be 100% as effective being remote, but we are pretty darn close and really haven’t missed a beat.
Since the lockdown last March, we have hired 109 people, including me, and now have a total of 244 employees. I have to say it was a bit surreal to start a new job and go through employee orientation via zoom! But we have a strong corporate culture and have done a bunch of things to maintain it during this time, while adding a lot of new employees. We’ve done things like sending snack boxes to employees, having Friday all hands meetings and “after parties,” celebrating big achievements with company-labelled items like sweatshirts, etc. It also helps that we hire people with great attitudes who really want to contribute to our success.
MY: Vandana, what has the team been busy working on in your neck of the woods?
VV: Through the first half of 2020 Clearcover was live in eight states. Since then, we have almost doubled both our geographic footprint and gross written premium. While we were busy bringing Clearcover to new markets, we also implemented eight product changes that were targeted at improving our competitive market position. As is well known in the insurance industry, especially Property and Casualty, there is a playbook to post high growth metrics and there is a playbook to be profitable. But it is very hard to do both and achieve that balance. I am proud of the way we have taken this on, committed to playing the long game, and demonstrated success so far — with underlying health metrics that continue to improve.
On the claims front, we continue to execute with urgency and focus to ensure we deliver on our promise to customers during their time of need. Last year, we delivered on Clear Claims, powered by ClearAI, and we see steady cycle resolution times under 15 minutes. Overall customer satisfaction, loss adjustment expense, and cycle times have shown remarkable improvement year over year.
MY: Norm, what particular metrics or KPIs have really stood out for the business over the last year or so and what is driving that?
NS: What stands out to me is our position in the market. The insurtech space has a bunch of companies with more coming, all of whom are trying to say they have a better way. When you cut through the noise and look at the stats, they tend to fall into one of two camps. Some have shown high growth but suffer from economics that just don’t work. Others have decent economics but show little to no growth. We set out to show that you can have significant growth and do it with attractive economics. In fact, our premiums doubled from 2019 to 2020 while we improved underlying unit economics. And as we continue to expand our geographic footprint and launch additional products, we have a huge growth runway ahead of us.
MY: Vandana, what are you focused on next?
VV: There is so much to look forward to in 2021 and beyond. We look forward to bringing Clearcover to many of the Southeast and Mid-Atlantic states soon. As is often true for early-stage companies, our product offering is inspired by market leaders who have consistently delivered. That said, every day we learn more and more about our customers, why they chose us, their expectations of a purely digital experience, and the distribution channels that drive growth. We are excited to enhance our offering in existing states, bring new products to the market, and differentiate ourselves as a digital for digital claims leader. It is a testament to this team on how far we’ve come and accomplished together, and equally inspiring to see that we’re still just getting started!
As you can see, the last 16 months were anything but boring at Clearcover. The Series D financing allows Clearcover to take the business to the next level and we look forward to continuing our partnership.
